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Holiday Budgets Stick With Consumers

Some positive economic notes pre-empt the 2009 holiday season, but retailers shouldn’t expect consumers to open their wallets just yet. A new study from IRI of over 1,000 U.S. households found that although increased optimism will prompt shoppers to spend, the majority will stick to a strict budget.

September 7, 2009, 08:00 pm
By Stacy Straczynski

Some positive economic notes pre-empt the 2009 holiday season, but retailers shouldn’t expect consumers to open their wallets just yet. A new study from IRI of over 1,000 U.S. households found that although increased optimism will prompt shoppers to spend, the majority will stick to a strict budget.

Over 94 percent plan to spend a maximum of $500 on food purchases, and 90 percent will limit their alcohol spend to a total of $200.

Ninety percent plan to make their food purchases in-store rather than online, and 92 percent plan to base their purchasing decisions on offered sales and discounts. Product selection and variety of items will also hold sway; however, only 11 percent of shoppers will not have an itemized grocery to prevent impulse purchasing. Seventy-one percent will not be giving food, such as fruit cakes, as gifts.

Ninety percent will choose private label products, which is an increase of 3 percent from 2008. Main reasons for the trade-down were reported as budgeting (79 percent) and a matched quality to brand-name items (60 percent).

More than 98 percent will make spending time with family a priority this season, with 93 percent planning to either host or visit family and friends.

“The holiday season is not necessarily going to be worse than last year, but it will be different. First and foremost is that the retailers themselves need to recognize that this will be a year of conservative shopping,” said IRI Consulting & Innovation’s president, Thom Blischok. “Without question, holiday celebrations for the family will be in this year … I think it’s going to be an interesting year for family meal planning. Some of the new flavors of Christmas foods this year are going to come out as a very unique position.”

In terms of gifting, 90 percent plan to make gift-giving a priority. But while 77 percent plan to treat themselves or others, the number of consumers budgeting over $799 (23 percent) will fall 13 percent. Budgets of up to $499 for gifts this year will increase by 11 percent, compared with 2008 numbers. Only 18 percent will shop without a list.

Shoppers will seek to find the best deals on gift purchases at mass retailers (77 percent) and department stores (65 percent). Predicted choice gifts were mainly electronics such as iPods and Blu-ray players. Online shopping will grow in popularity this season. Fifty-nine percent plan to make purchase online, an 18 percent increase from 2008.

“[Consumers] will budget their spending in a way that provides them the maximum eating and gift delight in a very reasonable fashion. They’ll spend a few percentages more, but people have relegated themselves to believe where they are in the economy today,” Blischok said. (He termed the effect “acceptance mode,” due to a continued numbing effect on the shopper.)

Yet, consumer concerns over economic issues have lightened. Food pricing concerns dropped by 20 percent, and worries over gasoline prices and utilities both fell around 10 percent. About 5 percent less reported that their purchasing decisions were swayed by the recession. Job security concerns (-1 percent) were still high.